Small Business Funding Alternatives: Combining Grants, Microloans, and Angel Investors for Maximum Capital

So, you have a million-dollar business idea. There’s just one thing missing: a million dollars. 

As the saying goes, it takes money to make money. If your small business is just getting off the ground, you need funding, and a traditional bank loan may not always be your best option.

That’s where alternative funding comes in. Combining multiple small business funding alternatives—such as grants, microloans, and angel investors—will help you gain the capital you need without putting all your eggs in one basket. That means less financial risk for you and more opportunity for your business to take off. 

Looking for some funding inspiration? Here are three small business funding ideas, plus tips to help you gain the capital you need for that million-dollar dream.

1. Grants: Competitive Cash With No Repayment

If you want direct capital that doesn’t need to be repaid, consider applying for a small business grant. 

Business grants are awarded by the government and private organizations to help stimulate the economy. In most cases, grants do not need to be repaid, but they may come with strict limitations. Some government-funded small business grants are only available to businesses with a limited number of employees, while others are reserved for a specific purpose, such as medical research or clean energy innovations.

Grant programs can be competitive. However, there are thousands available every year, so it’s important to do your research ahead of time, find out which grants your business qualifies for, and learn how to apply.

Some common grant programs in the U.S. include:

• SBIR and STTR grants: These federal grants are available to businesses in the science and technology fields that have the potential to be commercialized.
• NIH grants: The National Institute of Health offers grants to small businesses that engage in biomedical or behavioral research.
• SBDC grants: Small Business Development Centers (SBDCs) are local institutions that offer training, loans, and occasional grants. Contact your local SBDC to find out when grants are available. 
• The Stamps.com Flexibility Grant: This is a $25,000 small business grant offered to professional services businesses. Learn more about the grant and apply here.

2. Microloans: Fast, Flexible Funding

A microloan is a small business loan of under $50,000, although most are significantly smaller. You probably can’t fund your entire startup with a microloan, but you can use it to:

• Expand or enhance your storefront
• Repair equipment
• Fund a new piece of machinery
• Gain new inventory
• Rebuild or repair after an accident

The main benefit of choosing a microloan over a traditional bank loan is that most microloans offer flexible repayment plans. They also come with lower interest rates than traditional loans and, because the borrowed amount is relatively small, lower financial risk. 

One of the most common sources of microloans is the U.S. Small Business Administration (SBA). You may also apply for a microloan from a credit union or non-profit, often with the backing of the SBA. 

3. Angel Investors: Direct Investments for Rapid Growth

You might not have deep enough pockets to launch your small business—but someone else might. That person is an angel investor: an individual or collective who sees the potential in your business and wants to get involved. 

The upside of working with an angel investor is that they’re not a lender. You won’t have to pay your investor back with interest like you would with a bank loan. However, they aren’t offering free money — in most cases, the investor will want equity in your business. They may also have some say in major financial decisions as your business grows. 

You may want to consider finding an angel investor if you’re seeking assistance that extends beyond funding. The investor can act as a mentor, helping you steer your business on the road to fast growth. 

So, how do you meet your angel investor? You don’t have to be on an episode of Shark Tank. Start by networking in your area. Join local entrepreneur groups and reach out to investors online. Just ensure you have a well-crafted business plan and investment pitch—you need to wow them after all!

Combine and Conquer: Don’t Rely on Just One Funding Source

There are benefits and drawbacks to each of the alternative funding options discussed above. That’s why the best solution is to combine multiple funding sources to gain the capital you need. 

Combining small business grants, microloans, and the support of an angel investor will prevent you from borrowing too much money at once, minimizing debt. It will also provide some stability in case one funding source fails. For example, if you plan to fund your business solely through grants, you’ll fall short when you don’t receive every grant you apply for; if you rely on an angel investor, you could be left empty-handed when the investor changes their mind. Your safest bet is to diversify your funding, so you always have a fallback. 

How To Create a Funding Strategy

Combining funding options is the safest and smartest way to finance your growing business. But getting started might feel overwhelming. Here are a few steps to help you develop a funding strategy:

• Determine your needs: Outline your costs and calculate the total capital required to get your business up and running.
• Choose your funding options: Decide which funding options you want to apply for.
• Draw a funding roadmap: Decide how you will divvy up capital (i.e., microloans for equipment, grants for research development, etc.).
• Identify your sources: Find the grants, microloans, potential investors, and other funding sources that are the right fit for your business. 

Get Creative to Fund Your Business

When it comes to funding your small business, traditional loans are far from your only option. Alternative funding options offer lower risk and more flexibility than loans, especially if you combine multiple sources. Don’t be afraid to think outside the box and get creative with your funding.

Looking for a small business grant to boost your funding strategy? Check out the Small Business Flexibility Grant from Stamps.com. This $25,000 grant is for small businesses in the professional services sector, such as law firms, accounting firms, and real estate agencies. The deadline to apply is May 31, 2025—take advantage of this opportunity and apply here.

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